The U.S. unemployment rate inched up in February as more people joined the labor force to hunt for a job, according to government data released Friday.
The Labor Department reported that the unemployment rate rose from 6.6 percent in January to 6.7 percent in February — a move that actually suggests positive momentum for the economy. That’s because the uptick was not because of workers losing their jobs but rather more people looking for employment. The data also showed the economy added a solid 175,000 jobs last month after two months of lackluster growth.
“The overall impression is that things did slow down, but not as drastically as the December and January data suggested,” said Kevin Logan, chief U.S. economist at HSBC.
The slowdown in hiring this winter, coupled with recent weak data from the housing and manufacturing industries, have raised questions about the strength of the nation’s economic recovery. The strong growth enjoyed during the second half of 2013 has not carried into 2014, despite predictions that this would be a breakout year for the economy.
Some analysts have said that the data was skewed by the record-setting extreme winter. The economy has been buffeted by below-zero temperatures, historic snowfalls and disruptive ice storms. More than half of the nation’s lower 48 states were covered in snow early this week, the most since the National Oceanic and Atmospheric Administration began tracking the data a decade ago.
“This is a good, resilient report, especially given the weather,” Labor Secretary Thomas E. Perez said in an interview Friday. “It shows that the economy continues to move in the right direction.”
The labor force grew by 264,000 people in February, and more than three-quarters of them were job seekers — a sign that the rapid decline in the size of the workforce may be leveling off.
Many of the people who left the workforce were retirees or discouraged workers who had given up hope of finding a job. Their departure helped drive down the unemployment rate even when hiring was weak. If that trend reverses, it could signal that the job market is strong enough to give discouraged workers renewed hope, although economists cautioned it is still too early to tell whether that is occurring.
“We could be on the cusp of that,” Logan said. But, he added, “that’s a question that’s not answered by today’s data.”
Education continued to be a significant source of new jobs, with the sector adding 33,000 positions in February. The hospitality industry created 25,000 jobs and professional services increased by 79,000.
The beleaguered construction sector added 15,000 jobs, but manufacturing remained tepid with just 6,000 positions created. The federal government shed 6,000 positions, but that was offset by hiring at the state and local levels.
Investors initially cheered the news as the major U.S. stock indexes opened higher on Friday. But the euphoria wore off as the day progressed. The Standard & Poor’s 500-stock index eked out a 0.1 percent gain to close at 1,878, while the blue-chip Dow Jones Industrial Average ended modestly, up 0.2 percent to 16,453. The tech-heavy Nasdaq fell 0.4 percent.
Analysts blamed some of the volatility on traders attempting to parse what the recent data mean for the Federal Reserve’s bond-buying program. The stronger outlook for the recovery at the end of last year prompted the Fed to begin scaling back the amount of money it is pumping into the economy. The Fed has bought more than $1 trillion in bonds to help push down long-term interest rates.
In congressional testimony last week, Federal Reserve Chair Janet L. Yellen said the central bank would be “attentive to signals” that the recovery could be faltering, but that it is still trying to determine how much the weather has affected the data. Other central bank officials have suggested that the bar for changing plans is high. In an interview with The Washington Post, Atlanta Fed President Dennis P. Lockhart said he expects the data will fluctuate.
“The variability that comes sort of normally from quarter to quarter or month to month is not likely in my mind to justify a change,” he said Thursday. “It would have to be fairly material.”
The rise in the unemployment rate also gives the Fed more breathing room in its guidance on interest rates. The central bank has promised to keep its target for short-term rates near zero at least until the jobless rate hit 6.5 percent — a threshold that moved further away last month.
Still, Fed officials are likely to debate changes to that promise when they meet in Washington later this month. Several key policymakers, including Yellen, have indicated that they would prefer to move away from numerical targets in favor of more qualitative language describing the labor market.